Federal subsidies, known as cost-sharing reductions (CSRs), have been critical to ensuring that over 2 million lower-income adults ages 50 to 64 who purchase coverage through health insurance Marketplaces can afford health care.[1] Despite the subsidies’ crucial role, the Administration announced yesterday that it will terminate payments for CSRs. The announcement—which comes less than 3 weeks before millions of Americans who buy insurance on the individual market start shopping for 2018 health coverage— is bad news for older adults and people of all ages.

That’s because the move could leave people facing significantly higher premiums and fewer plan choices—regardless of their income or whether they get CSRs.

What are cost-sharing reductions?

The Affordable Care Act’s (ACA) better known premium tax credits help reduce the cost of monthly health insurance premiums for lower- and moderate-income individuals. CSRs address the other major expenses that can prevent people from being able to afford health care: out-of-pocket costs for health care services, such as deductibles, coinsurances and copayments. CSRs are available to lower-income people, with individuals of more modest incomes receiving greater subsidies.[2]

CSRs are critical to making individual health insurance affordable for people with lower incomes. This is especially true for lower-income older adults because over a third of the people enrolled in CSR plans are ages 50 to 64.[3] What’s more, older adults typically face higher out-of-pocket medical expenses and cost-sharing because they are more likely to have chronic conditions and health care needs. You can learn more about CSRs here.

Eliminating CSR payments will lead to significant increases in premiums.

Without the federal CSR payments, insurers will have to absorb an estimated $10 billion in costs.[4] A recent analysis by the Congressional Budget Office (CBO) estimates that silver plan premiums would jump 20% next year and 25% by 2020 without the federal CSR subsidies.

Due to uncertainty in recent months over the continuation of CSR payments, insurers in some states have already factored premiums increases into their 2018 rates. Other insurers will likely increase premiums in order to account for this loss in federal payments.

Premium increase will hit middle-income people the most – especially those who do not receive premium tax credit subsidies, or who are only eligible for limited tax credits.

The CBO also expects that controversy around CSR payments will encourage some insurance companies to stop offering coverage altogether or deter them from entering the Marketplaces—leaving consumers with fewer, or potentially, no plan choices.

Terminating CSR payments would increase the federal deficit.

If you think stopping CSR payments would save federal dollars, think again. Doing so would actually increasethe federal deficit by $200 billion, CBO estimates. This is because the government is required to fund premium tax credits for lower-income enrollees, and the premium increases resulting from ending CSR payments would mean the government must spend billions of dollars more in premium tax credits to lower those premium costs for lower-income enrollees.

Recent proposals to replace the ACA would have eliminated cost-sharing reductions altogether. Without CSRs, lower-income older adults would face steep increases in their medical bills—putting needed health care services out of reach for millions. We estimate that eliminating CSRs would mean lower-income persons could face as much as $5,600 more in out-of-pocket costs for copays, co-insurances and deductibles.[5] For someone earning $18,000 annually (about 150% of FPL), that’s nearly one-third of their income!

Here’s the bottom-line: Cost-sharing reductions are a critical financial protection for lower-income Americans, including many older adults. Terminating CSR payments will disrupt efforts to ensure a stable individual health insurance market and actually end up costing the government more.

Olivia Dean is a policy analyst with the AARP Public Policy Institute. Her work focuses on a wide variety of health-related issues, with an emphasis on public health, health disparities, and healthy behavior.

Claire Noel-Miller is a senior strategic policy adviser for the AARP Public Policy Institute, where she provides expertise in quantitative research methods applied to a variety of health policy issues related to older adults.

[2] Cost-sharing reductions are available for people who earn between 100% and 250% of the federal poverty level (FPL). In 2017, this corresponds to incomes between $12,060 and $30,150 for an individual and to incomes between $24,600 and $61,500 for a family of four. Only people enrolled in Silver plans (which pay for 70% of total health care costs on average) are eligible for cost-sharing reductions.

[5] For people with incomes between 100-150% of the federal poverty level, or between $12,060 and $18,090 for an individual. Estimates are based on 2017 federal poverty levels and out-of-pocket limits.

A late-breaking attempt to repeal and replace the Affordable Care Act (ACA) threatens to weaken critical federal consumer protections and raise costs for older Americans ages 50-64 who purchase health insurance coverage in the individual market. Tucked into the sweeping legislation known as the Graham-Cassidy bill are provisions allowing states to receive waivers from crucial consumer protections. Such waivers could allow insurance companies to increase costs for older consumers based on their health, preexisting conditions, and age–potentially putting health coverage out of financial reach for millions.

People with Preexisting Conditions Could Face Significantly Higher Premiums

Current law prohibits health insurance companies from denying people coverage or charging higher rates based on a person’s health. Under the Graham-Cassidy bill, however, states could obtain a waiver to allow insurers to vary premiums based on people’s health or preexisting condition. This means that consumers with a health condition such as diabetes, cancer, or heart disease could face significantly higher premiums.

This would hit older adults hard: 40 percent of 50- to 64-year olds have a preexisting condition. Prior to the ACA, most states allowed insurers to charge higher premiums based on preexisting conditions. That meant consumers with preexisting conditions were often unable to purchase affordable coverage. The Graham-Cassidy bill would force consumers to, once again, worry about whether their health status will keep them from being able to afford coverage or the care they need.

Less Coverage and Higher Costs for Older Adults and People with Preexisting Conditions

The Graham-Cassidy bill would also allow states to waive current law requirements that health insurance plans cover 10 categories of services (known as Essential Health Benefits). Similar to earlier proposals, states could eliminate some or all of the required benefits. Without these requirements, insurers could choose to exclude or limit important health benefits such as hospital care, prescription drugs, and mental health or substance abuse treatment. For people with health concerns and preexisting conditions, finding adequate, affordable coverage with the benefits they need would very likely become challenging and expensive.

These waivers may also allow states to weaken or eliminate the ACA’s prohibition against dollar limits on benefits people may get in a year or over their lifetime. Such annual and lifetime caps were unfortunately common practice prior to the ACA—forcing some consumers into medical bankruptcy when they got sick. Weakening these key protections is a step backwards for consumers.

Insurance Companies May be Allowed to Discriminate Against Older Americans

Under the ACA, insurers cannot charge older adults more than three times what they charge others for the same coverage (known as 3:1 age rating). Under Graham-Cassidy, however, states may be able to waive this critical protection for older adults. Older adults living in states that have waived that protection would face significantly higher rates simply on the basis of age– potentially as high as five, six or more times what they charge others for the same coverage, depending on the state.

In short, the Graham-Cassidy bill is harmful for older adults and people with preexisting conditions. It would undermine critical consumer protections, making health insurance coverage unaffordable and denying people with health conditions the care they need.

In response to Tuesday’s Senate vote on the motion to proceed to consider a health care bill that would cut Medicare and Medicaid and impose an Age Tax on older Americans, AARP Executive Vice President Nancy LeaMond released the following statement:

“AARP is disheartened that a majority of Senators voted to move forward on a bill that would devastate millions of Americans. Today’s vote means the Senate is one step closer to passing legislation that will price gouge people over age 50 and strip health insurance from tens of millions of Americans.

“AARP will continue fighting to stop the Senate from passing any bill that increases costs, imposes an Age Tax, strips coverage from people, cuts Medicare, and cuts the Medicaid services seniors need to stay in their homes.

“Any Senator considering voting for the health care bill should understand the consequences of ignoring AARP’s 38 million members. People over age 50 overwhelmingly vote and they will remember who voted to give them a $13,000 premium hike. AARP will print every Senator’s vote in AARP Bulletin, a publication read by 30.4 million people.

“None of the current bills is the right way to fix health care. AARP stands ready to work with Congress on bipartisan solutions that will lower costs and improve care.”

To learn more, visit www.aarp.org or follow @AARP and @AARPadvocates on social media.

The Better Care Reconciliation Act (BCRA) now under consideration in the Senate would drastically alter the Medicaid program. The proposed Senate bill would change the way the federal government currently funds Medicaid by limiting federal funding and shifting cost over time to both states and Medicaid enrollees. BCRA would subject older adults, adults with disabilities, and children to mandatory per enrollee caps beginning in 2020. State Medicaid programs would have the option to choose between block grants and per enrollee caps for non-elderly non-disabled non-expansion adults.

The Senate bill would start out using the medical care component of the Consumer Price Index (M-CPI)—a measure of the average out-of-pocket cost of medical care services used by an average consumer—as the growth rate for per enrollee caps. However, beginning in 2025, it would slash the growth rate to the Consumer Price Index for all urban consumers (CPI-U)—a measure of general inflation that examines out-of-pocket household spending on goods and services used for everyday living. CPI-U does not tie closely to medical costs and will not reflect population growth or the impact of aging. To be clear, none of the proposed growth factors—M-CPI, M-CPI+1, and CPI-U— keep pace with the growth in Medicaid spending.

Although studies have examined the impact of Medicaid spending cuts in the House-passed healthcare bill over a 10 year period (e.g. [CBO] [CMS] [Urban Institute]) we know of none that examine the impacts over a longer time horizon. To fill this gap, the AARP Public Policy Institute has developed a model that looks out an additional decade to capture impacts on Medicaid spending between 2027 and 2036.

By dramatically reducing the per capita cap growth factor beginning in 2025, we project that the Senate bill would cut between $2.0 and $3.8 trillion from total (federal and state) Medicaid spending over the 20-year period between 2017 and 2036 for the four non-expansion Medicaid enrollment groups: older adults, adults with disabilities, children, and non-expansion adults (children with disabilities are excluded because BCRA does not subject them to capped funding). A cut of this magnitude threatens the viability of the program in unprecedented ways and will increase the number of people who no longer have access to essential healthcare services and critical supports. The projections do not include the proposed cuts to the adult expansion population, which would also be considerable.

Previousanalysis by the AARP Public Policy Institute discusses why capping Medicaid is flawed and would leave states and the poorest and sickest Americans holding the bag for the shortfalls that will most certainly occur.

Table 1 shows the cumulative 20-year cuts to Medicaid by eligibility group under the Senate health reform bill for three growth rate projections. The bill would cap per enrollee cost growth using two measures of inflation (M-CPI and CPI-U), which are highly variable and uncertain, though well short of what is needed to maintain the integrity of the Medicaid program. It is difficult to plan for such uncertain growth rates, and reasonable projections are far apart.

We present the high, middle, and low case for M-CPI/CPI-U growth rates based on the following:

Low Case. Based on historical growth rates. Over the last five years (2012-2016), the M-CPI growth rate has averaged 3.0% per year, and the CPI-U growth rate has averaged 1.32% per year.

Middle Case. Based on projections from the Congressional Budget Office. CBO projects M-CPI to grow by 3.7% per year, and CPI-U by 2.4% per year.

High Case. Based on projections from 2016 CMS Medicaid Actuarial Report. From 2019 onward, this report projects M-CPI to grow by 4.2% per year, and CPI-U by 2.6% per year.

In short, the lower the cap growth rate, the more severe the Medicaid cuts will be.

The charts below demonstrate that for any projection of the bill’s cap growth rates, BCRA will lead to significant funding shortfalls for older adults, adults with disabilities, and non-disabled low-income children and adults. The end result is that states and beneficiaries will be left with severe funding shortages, and states will be forced to cut eligibility, provider rates, or covered services—or very likely all three.

Susan Reinhard is a senior vice president at AARP, directing its Public Policy Institute, the focal point for AARP’s public policy research and analysis. She also serves as the chief strategist for the Center to Champion Nursing in America, a resource center to ensure the nation has the nurses it needs.

Jean Accius is vice president of livable communities and long-term services and supports for the AARP Public Policy Institute. He works on Medicaid and long-term care issues.

Lynda Flowers is a Senior Strategic Policy Adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.

Ari Houser is a Senior Methods Adviser at AARP Public Policy Institute. His work focuses on demographics, disability, family caregiving, and long-term services and supports (LTSS).

The Better Care Reconciliation Act (BCRA) now under consideration in the Senate would drastically alter the Medicaid program. The proposed Senate bill would change the way the federal government currently funds Medicaid by limiting federal funding and shifting cost over time to both states and Medicaid enrollees. BCRA would subject older adults, adults with disabilities, and children to mandatory per enrollee caps beginning in 2020. State Medicaid programs would have the option to choose between block grants and per enrollee caps for non-elderly non-disabled non-expansion adults.

The Senate bill would start out using the medical care component of the Consumer Price Index (M-CPI)—a measure of the average out-of-pocket cost of medical care services used by an average consumer—as the growth rate for per enrollee caps. However, beginning in 2025, it would slash the growth rate to the Consumer Price Index for all urban consumers (CPI-U)—a measure of general inflation that examines out-of-pocket household spending on goods and services used for everyday living. CPI-U does not tie closely to medical costs and will not reflect population growth or the impact of aging. To be clear, none of the proposed growth factors—M-CPI, M-CPI+1, and CPI-U— keep pace with the growth in Medicaid spending.

Although studies have examined the impact of Medicaid spending cuts in the House-passed healthcare bill over a 10 year period (e.g. [CBO] [CMS] [Urban Institute]) we know of none that examine the impacts over a longer time horizon. To fill this gap, the AARP Public Policy Institute has developed a model that looks out an additional decade to capture impacts on Medicaid spending between 2027 and 2036.

By dramatically reducing the per capita cap growth factor beginning in 2025, we project that the Senate bill would cut between $2.0 and $3.8 trillion from total (federal and state) Medicaid spending over the 20-year period between 2017 and 2036 for the four non-expansion Medicaid enrollment groups: older adults, adults with disabilities, children, and non-expansion adults (children with disabilities are excluded because BCRA does not subject them to capped funding). A cut of this magnitude threatens the viability of the program in unprecedented ways and will increase the number of people who no longer have access to essential healthcare services and critical supports. The projections do not include the proposed cuts to the adult expansion population, which would also be considerable.

Previousanalysis by the AARP Public Policy Institute discusses why capping Medicaid is flawed and would leave states and the poorest and sickest Americans holding the bag for the shortfalls that will most certainly occur.

Table 1 shows the cumulative 20-year cuts to Medicaid by eligibility group under the Senate health reform bill for three growth rate projections. The bill would cap per enrollee cost growth using two measures of inflation (M-CPI and CPI-U), which are highly variable and uncertain, though well short of what is needed to maintain the integrity of the Medicaid program. It is difficult to plan for such uncertain growth rates, and reasonable projections are far apart.

We present the high, middle, and low case for M-CPI/CPI-U growth rates based on the following:

Low Case. Based on historical growth rates. Over the last five years (2012-2016), the M-CPI growth rate has averaged 3.0% per year, and the CPI-U growth rate has averaged 1.32% per year.

Middle Case. Based on projections from the Congressional Budget Office. CBO projects M-CPI to grow by 3.7% per year, and CPI-U by 2.4% per year.

High Case. Based on projections from 2016 CMS Medicaid Actuarial Report. From 2019 onward, this report projects M-CPI to grow by 4.2% per year, and CPI-U by 2.6% per year.

In short, the lower the cap growth rate, the more severe the Medicaid cuts will be.

The charts below demonstrate that for any projection of the bill’s cap growth rates, BCRA will lead to significant funding shortfalls for older adults, adults with disabilities, and non-disabled low-income children and adults. The end result is that states and beneficiaries will be left with severe funding shortages, and states will be forced to cut eligibility, provider rates, or covered services—or very likely all three.

Susan Reinhard is a senior vice president at AARP, directing its Public Policy Institute, the focal point for AARP’s public policy research and analysis. She also serves as the chief strategist for the Center to Champion Nursing in America, a resource center to ensure the nation has the nurses it needs.

Jean Accius is vice president of livable communities and long-term services and supports for the AARP Public Policy Institute. He works on Medicaid and long-term care issues.

Lynda Flowers is a Senior Strategic Policy Adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.

Ari Houser is a Senior Methods Adviser at AARP Public Policy Institute. His work focuses on demographics, disability, family caregiving, and long-term services and supports (LTSS).

The American Health Care Act (AHCA) threatens to do away with the Affordable Care Act’s (ACA) protection for people with preexisting health conditions. This provision prevents insurance companies from denying these individuals coverage.

Eliminating this protection would force millions of Americans to—once again—rely on state high-risk pools. State high-risk pools are supposed to provide access to health insurance for people who cannot get coverage in the individual health insurance market because of preexisting health conditions.

State high-risk pools may sound like a good idea but, in reality, they are fraught with problems. One of the biggest lessons learned from experience with state high-risk pools: steep premiums that put coverage out of reach for millions. In the past, monthly premiums in state high-risk pools could be up to 200 percent higher than in the individual (non-group) market. Consequently, only a small fraction of those with preexisting conditions could afford to buy a plan. Yet, these premiums—high as they were—only covered about half the amount needed to pay enrollee claims. Most states tried to close the financial gap through taxes on providers and government subsidies, but even those efforts proved insufficient. We project that if states return to pre-ACA high risk pools in 2019, premiums for people with pre-existing conditions could be as high as $25,700 annually.¹

Another problem with state high-risk pools was that they typically offered skimpy coverage. For example, people who bought insurance through high-risk pools in nearly all states that offered them had to wait between six and 12 months before their preexisting conditions were covered. In addition, many had annual dollar limits on coverage for prescription drugs and behavioral health services.

The AHCA would provide $100 billion over nine years to fund—among other things—state high-risk pools. This level of funding is woefully inadequate to meet the need. One study estimates that it would cost at least $178 billion a year to adequately fund high-risk pools today. In the current policy environment, it is unlikely that the federal government will provide the necessary funding to make state high-risk pools work for the millions of people with a preexisting condition.

Bringing back insurers’ ability to consider preexisting conditions would hit older people especially hard—since people tend to have more health problems as they age; but younger people could be hurt by these policies too. Thus, the ban on preexisting conditions is an important protection for people of all ages. It’s time to stop recycling bad policies and come up with solutions that work for everybody.

Lynda Flowers is a senior strategic policy adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.

Claire Noel-Miller is a senior strategic policy adviser for the AARP Public Policy Institute, where she provides expertise in quantitative research methods applied to a variety of health policy issues related to older adults.

[1] Calculations by AARP Public Policy Institute. Estimate derived as follows: State-specific average premium data in 2010 obtained by dividing total premium revenues over total enrollment in each state high-risk pool. The average premium was inflated to 2019, when the AHCA would allow high-risk pools, using actual and projected per capita growth rates from direct purchased private health insurance from CMS Office of the Actuaries.